Bang Went (Some Of) The Christmas Bonus?

Seven years on, thanks to Sarawak Report’s initial expose of an eyebrow raising series of deals with 1MDB, which global regulators appeared to have totally missed at the time, America’s most powerful bank, Goldman Sachs, now faces total fines or around $5 billion.

It follows news of the latest settlement by the bank over 1MDB and the sum represents roughly the amount stolen from the public of Malaysia in the course of the scandal. Restoring those borrowed monies will cost more than double the amount.

Thanks to this latest reported plea deal with the US Department of Justice Goldman Sachs has now effectively admitted to being one of the main conspirators, facilitators and beneficiaries of the crime.

The settlement is yet to be officially announced but it is widely reported the bank has accepted to pay a further $2.2 billion fine to the Department of Justice, plus the repayment of the $600 million in fees they originally made from the crooked business.

For the bank, of course, it’s a highly manageable outcome and comes on the heels of another low end settlement the bank has agreed with Malaysia of $2.5 billion plus a guarantee of asset returns.

As the Wall Street Journal has calculated the fines represent a “wiping out about two-thirds of a year’s profits“. However, the paper points out that, as long suspected, “the firm will avoid the harshest penalties that prosecutors have sought and it has already accounted for the cost in its financial reports to shareholders”.

Those harsher penalties which have been avoided included the laying of virtually unprecedented criminal charges against a swathe of alleged white collar crime committers at the bank and indeed against the bank itself.

According to widespread reports those charges will be deferred at least, rather than being dropped entirely, as a reminder of the ill deeds alleged and as a threat against future transgressions by a bank which has developed a ‘reputation’ for getting away with just about anything in recent years.

So, yet another warning but yet another pass. Will things change this time?

In terms of real ‘punishment’, bonuses this Christmas may well be less eye-popping than, for example, during the bumper years of 2013/14 when those connected to the 1MDB deals wallowed in extra millions thanks to the outrageous commissions the bank received for managing and then covering up 1MDB’s fraudulent bond issues.

One of those managers, as the WSJ points out, was the present CEO of the bank David Solomon who headed the  division involved in the scandal. It hasn’t stopped his path to the top, however two senior bankers a little further down the line have faced criminal charges, namely South East Asia boss Tim Leissner and his colleague Roger Ng – Leissner having already pleaded guilty to assisting the heist in return for $200 million in backhanders.

However, these were just the small fry. It has emerged Solomon’s predecessor Lloyd Blankfein had met with Jho Low together with Najib at the start of the relationship with 1MDB in New York, despite Low having been ‘Red Flagged’ by the bank’s compliance departments as a suspicious customer with whom not to do business.

Blankfein announced on retiring late 2018 that he thought it was the ‘right time’. However, a shareholder class action suit against him and the bank names the top managers Blankfein, Solomon and Tony Schwarz specifically as defendants and has laid out devastating allegations indicating those at the very top echelons of the bank deliberately ignored multiple red flags and warnings and even expressions of concern from senior figures about getting involved with the lucrative business from 1MDB.

The complaint states the very point that Sarawak Report originally published back in 2013,  that “1MDB’s willingness to pay Goldman nearly 200 times the typical fee was a strong indicator that misconduct was afoot.”  

The top Goldman executives even over-ruled the bank’s President of Goldman’s Asia division who’d opposed engaging in Najib and Jho Low’s shady business dealings, effectively forcing his resignation in July 2013 the month Sarawak Report ran its first expose:

“Within Goldman were executives and senior bankers who saw how dubious the 1MDB deals were and sensed the reputational damage that they could bring. Yet when they spoke out, as the BSC reforms had both encouraged and required, Goldman silenced them. For example, David Ryan, President of Goldman Asia and member of Goldman’s Management Committee, expressed misgivings during each of the three offerings about the deals’ suspect terms, the bank’s unwarranted profits, and the fund’s willingness to award Goldman the unusually lucrative underwriting business without soliciting competing bids.Rather than heed the concerns of one of the bank’s senior-most executives, Cohn sidelined Ryan, overruled his repeated warnings, and installed a pro-1MDB chairman above him.” [class action by shareholders]

It has taken seven years of scandal, denial and rebuttal for the bank to finally agree to accept its guilt. As Najib sought to deny the undeniable and cracked down in Malaysia Goldman Sachs lay low, withheld its mounds of information on the crime and implied no wrongdoing on its part.

Only when the Malaysian people voted out its crooked government and the FBI came knocking on their door did the bankers from Wall Street finally accept the game was up.

Even so, this final settlement represents a hard fought retreat by the powerful bank, which has used every tool to mitigate the consequences of their greedy engagement in the plunder of Malaysia’s public purse.  It was a deal personally overseen by the US Attorney General, William Barr, who obtained a waiver with regard to his potential conflict of interest (in that Goldman hired his previous law firm to represent them in the case) and the details are expected to be published shortly.

Given these tactics, it has been long anticipated that there would be pressure to achieve a resolution in advance of the American election. For Goldman what better time to admit to its litany of sins over 1MDB and pay its price while stars were favourably aligned and the world distracted by the political theatre time-tabled for this period?

Malaysians will note that whilst KL’s petty thieves are whipped and jailed, their convicted kleptocrat prime minister remains a sitting parliamentarian in the country and over in the US these top ‘deferred guilt’ bankers have been partying in the Hamptons to celebrate reduced 1MDB payouts that will cost their shareholders but so far not themselves.

Tim Leissner is due to receive his own sentence in January and Roger Ng, who was extradited on 1MDB charges to the US, continues to plea not guilty.

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